TO: Dr. Ken Mardaneh, Melbourne Institute of Technology
From: Tony Bongomin
Subject: Organizational Change and Development
This is the report you requested on the organizational change and development of Pilkington. The case study, provided by you, was reviewed and analysis was formed. I am confident that the changes discussed in the report will be of significant value.
PILKINGTON: A CASE STUDY
PURPOSE OF REPORT
The goal of this report is to discuss the problems faced by Pilkington Plc. This report also discusses the steps taken by the company to solve those challenges and the impact they had on its performance.
It was found that Pilkington suffered from a weak organizational culture that adversely affected the company’s performance in the market. Apparently, the employees would deliberately delay work, to receive overtime from the enterprise. When addressed, the workers resisted against the company. However, the company’s persistence resulted in bringing about changes in the company’s hierarchical structure and imposing performance checks. Pilkington made it clear the employees that poor performance would result in termination.
To counter non-productive employees, it is important for the company to impose performance checks and to make efficient people monitor the employees. This will encourage the employees to work efficiently and instill motivation among them. In case, the employees do not perform then termination would be an alternative.
TABLE OF CONTENTS
The Pilkington Group first opened shop in 1826 in St. Helen. Originally it was called the St. Helens Crown Glass Company. It became a private company in 1894, and later in 1970, it was listed on the London Stock Exchange (“Australia and New Zealand,” n.d.).
The goal of this report was to analyze the reasons that led to Pilkington bringing a change in its organizational structure and its impacts.
This report consists of research conducted on the change in organizational structure. It answers the question; whether the change was needed and beneficial for Pilkington.
The information used in this report was taken from the internet. There is significant information about Pilkington available on the web. Besides, the information related to the organizational change in the company was taken from the case study.
The report does not discuss the impact it had on the motivational level of the employees, which may have been directly related to their appraisal.
2.1 BACKGROUND INFORMATION
Pilkington Australia is a subsidiary of the Pilkington plc. The most common markets that the company serves are the construction and automobile industries, in recent times this has expanded to include the energy and electronic markets as well. At Pilkington production is done 24/7.
Until the end of the 1980s, Pilkington enjoyed a strong hold on the glass industry. However, because of some factors, Pilkington was forced to make several organizational changes. The increase in foreign competition; fuelled by reduction of tariffs and import quota levels, had enabled third world countries to compete in the global marketplace, causing Pilkington to face difficulties.
Other factors were also there that caused Pilkington to bring about organizational changes. In the past Pilkington had a workforce of senior employees, these employees had made a trend of working late. Consequently, over time made up for a significant share of payroll hence, management could see that if the organization were to profit such a practice would have to discontinue.
A major concern for management was to change the organizational culture. Its employee’s attitude to work late, to attain overtime was hurting the company. Pilkington’s employees were limiting the company’s output, as well as forcing the company to pay larger salaries for late work.
In this section, we will be discussing the change brought about by Pilkington to address its external and internal problems. The change process at Pilkington was done in three steps (Burke & Noumair, 2015).
PHASE 1 – NOVEMBER 1994: The first phase included a significant redesign of Pilkington’s formal structure. Top management decided to reverse the traditional hierarchical structure so that managers received information from those below them. This was seen as a step to reducing the different relationship between management and the shop floor. Management also recognized that the most appropriate suggestions regarding all aspects of the production process could be made by the shop floor employees themselves. The fundamental step in this change was to form teams. The basic idea behind this move was to use groups to encourage participation and involvement among the employees. Thus, instead of being monitored by the upper management, the work completed by the teams would be followed by the team members themselves. Although each team would have a team coordinator or leader, the team itself would be given a relatively large amount of autonomy, provided the required work was completed (“Pilkington: an Organisation in Transition Essays – 626 Words | Bartleby,” n.d.).
PHASE 2 – NOVEMBER 1995:
In Phase 2, the company designed the Stage II Enterprise Agreement. The sole purpose for it was to recommend a more comfortable communication between the management and employees. Initially, the employees were required to undergo training to become multi-skilled. However, this resulted in employees being trained in remote areas. Therefore, in the second phase, all previous training programmes were removed.
PHASE 3 – DECEMBER 1996: In 1996 Pilkington wrote a report. The main reason for writing this report was to alter the office culture by eliminating all barriers to allow all employees to work in a positive environment.
The report introduced a wider variety of changes. Some organizational changes were initiated. The report enforced the Total Productive Maintenance (TPM) concept, in which the employees who operate the equipment were supposed to be experts. Additionally, the report canceled all previous restrictions on training programmes. The new report further introduced policies related to the behavior of employees. All staff was informed that response would be taken seriously and negative behavior would result in termination.
The causes behind Pilkington making such changes were the primary concerns it had with its employees. These employees had created a culture of taking work easy and delaying the process. This culture was, in turn, hurting the company’s overall performance. This was more so because the company was already facing stiff competition in the market.
The suitable changes made to the organizational structure; that included reversing the hierarchical structure had significant effects. The work process became fast, and the company was able to get rid of the overtime culture.
An evaluation of the change brought about by Pilkington has been able to measure the productivity among employees. This criterion was measured by taking into account factors such as the cost of manufacturing, market prices, and return on investment and profit levels. The company achieved a 31% turnaround in profits.
Apparently, by bringing significant organizational changes, the company was able to gain positively. The company’s analyst may look at the 31% turnaround negatively, but we need to keep in mind that the glass prices dropped causing a low profit. The overall picture is quite rosy and shows that the changes positively motivated the actual employees.
Pilkington, a major glass manufacturing company; that has been in business for more than a century, has been facing serious problems. Initially, these problems seemed to be because of intense competition from manufacturers from India and Germany; who could produce at a low cost. However, a careful analysis proved that the problem was the company’s culture (“How to Change Organizational Structure | Chron.com,” n.d.).
The company, being a manufacturing unit, had a strong labor union. And, among the employees, there was a culture of doing work slowly and working late, to cash the overtime allowance; which allowed the employees to take home a hefty amount. The company had to pay non-productive employees lots of money in salaries and not get much in return.
To tackle this situation, the company made changes in its organizational structure. It reversed the hierarchical structure and allowed the employees on the lower level to provide information to the higher management. Subsequently, the lower level employees were grouped into teams and told to monitor their performances.
The company also decided to give only deserving employees the training they required. Further, policies were enforced to check the behavior of every employee, and everyone was informed that inappropriate behavior would result in termination.
The change process was met with resistance from employees. Many employees resorted to strikes and boycott of the company’s policies. However, the threat of being terminated resulted in the employees bowing down in front of the higher management.
The changes made resulted in creating a feeling of competition and professionalism among employees. Employee morale went up, and the company witnessed a profit of around 31%. The low gain was probably because of falling prices of glass (“The Impact Of Organizational Change, Structure And Leadership On Employee Turnover: A Case Study (PDF Download Available),” n.d.).
To counter non-productive employees, it is important for the company to impose performance checks and making efficient people monitor the employees. This will encourage the employees to work efficiently and instill motivation among them. In case, the employees do not perform then termination would be an alternative.
Australia and New Zealand. (n.d.). Retrieved September 29, 2017, from http://www.pilkington.com/au
Burke, W. W., & Noumair, D. A. (2015). Organization Development: A Process of Learning and Changing. FT Press.
How to Change Organizational Structure | Chron.com. (n.d.). Retrieved September 29, 2017, from http://smallbusiness.chron.com/change-organizational-structure-3820.html
Pilkington: an Organisation in Transition Essays – 626 Words | Bartleby. (n.d.). Retrieved September 29, 2017, from https://www.bartleby.com/essay/Pilkington-an-Organisation-in-Transition-F3C9NT23VC
The Impact Of Organizational Change, Structure And Leadership On Employee Turnover: A Case Study (PDF Download Available). (n.d.). Retrieved September 29, 2017, from https://www.researchgate.net/publication/228574222_The_Impact_Of_Organizational_Change_Structure_And_Leadership_On_Employee_Turnover_A_Case_Study